Tax cut debate starts, no joy on welfare

The coalition’s tax-cutting budget has been put to parliament, but the government is fending off pressure to lift welfare payments.

The budget, likely the last before the election, hinges on income tax cuts for low- and middle-income workers due to start on July 1, as well as even bigger tax cuts years down the line.

Prime Minister Malcolm Turnbull played down talk the government will use the budget as an excuse to go to an early election.

“You should be planning your election coverage for next year,” he told Sky News on Wednesday.

Mr Turnbull also defended the lack of any movement on Newstart, which has not had any real rate lifts since 1994.

Former prime minister Mr Howard joined economists, advocacy groups and the Business Council of in calling for the Newstart rate to be raised.

“Yeah, I think there is an argument about that, yeah I do,” he told a post-budget breakfast in Melbourne on Wednesday.

“I was in favour of freezing it when it happened, but I think the freeze has probably gone on too long.”

Mr Turnbull said welfare payments increased every year with inflation.

“We believe the setting is right. It is a safety net,” he said.

Treasurer Scott Morrison told Labor the three phases of his seven-year tax plan are one package, despite Labor promising to only support the first stage.

“I’m introducing the whole plan, and it’s a test for Labor – do they want taxes to be lower or do they want them to be higher,” Treasurer Scott Morrison said.

The treasurer said he was still committed to reducing the company tax rate to 25 per cent from 30 per cent.

Labor will back the first tranche of tax cuts for low and middle-income workers, but attacked the overall plan.

“They want us to have a debate about a possible tax cut in the year 2024. That’s two or three elections down the track,” Opposition Leader Bill Shorten said.

The tax cuts start at $200-a-year for those in the lowest bracket, rising to $530-a-year for those earning up to $90,000, from July this year.

The $90,000 figure is the new threshold for the 32.5 per cent tax bracket, while in four years the $37,000 tax threshold for the 19 per cent rate will be lifted to $41,000.

In 2024/25 the government will abolish the 37 per cent rate.

That means everyone earning $41,000 to $200,000 will pay the same 32.5 per cent of their income.

Mr Morrison also said his economic forecasts are conservative, despite expecting wages growth to race along at 3.5 per cent in four years time.

Mr Shorten will deliver his budget reply speech on Thursday night.